JP Morgan opens the door for digital currency exchanges On the other hand, the encryption world has divided
Text | Edited by Li Zheweng | Produced by Bi Tongtong | PANews
Text | Edited by Li Zheweng | Produced by Bi Tongtong | PANews
Despite still advising its investors not to add bitcoin or other cryptocurrencies to their portfolios in a report this year, JPMorgan has taken a landmark step into the crypto world.
According to a recent Wall Street Journal report, JPMorgan Chase, one of the largest financial institutions in the United States, will begin providing banking services to cryptocurrency exchanges Coinbase and Gemini, whose bank accounts at JPMorgan Chase were approved in April. In the initial stage of cooperation, JP Morgan will provide cash management services for US clients of the above-mentioned exchanges, including wire transfer and deposit and withdrawal services, but it will not directly touch the clearing and settlement of cryptocurrencies.
As signaled by hedge fund legend Paul Tudor Jones' foray into Bitcoin, JPMorgan's services to cryptocurrency exchanges have provided a good endorsement for the sector, and the news has also caught Wall Street's attention. A banker told the media The Block that, in addition to direct revenue considerations, JPMorgan Chase’s move may also bring it opportunities to underwrite Coinbase and Gemini IPOs in the future, and may consider listing JPM Coin on the above-mentioned platforms.
Undoubtedly, this cooperation is another major milestone for the encryption world to integrate into the mainstream. It is very important to understand the logic behind it, but at the same time, it cannot be ignored that it is still a long time before the entire encryption world and traditional financial institutions reach long-term and stable cooperation.
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A "like-minded" cooperation
High compliance and fiat currency settlement are the common strong attributes of the two exchanges, Coinbase and Gemini, which are perfectly coupled with the banking industry's compliance requirements.
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Coinbase holds various financial licenses in 47 states in the United States | Source: Coinbase official website
According to PANews, in terms of licenses, both exchanges are registered as Money Transmitters in several states in the United States, and hold BitLicense licenses issued by the New York State Department of Financial Services (NYDFS). In addition, Gemini has obtained a trust license in New York State, and Coinbase is registered as a money service enterprise MSB (Money Services Business) in the Financial Crimes Enforcement Network (FinCEN) under the U.S. Department of the Treasury.
In terms of finance, Gemini passed the audit of Deloitte, one of the Big Four accounting firms, while Coinbase passed the audit of Grant Thonton, another major accounting firm.
Judging from the flow of funds on the two exchanges, the fiat currency occupies an absolute dominant position, which obviously provides a considerable profit space for banks such as JPMorgan Chase. According to data from Coingecko on May 15, in the past 24 hours, Coinbase Pro had a transaction volume of approximately US$5.7 billion, of which 91.8% of the transaction volume was completed in three legal currencies: US dollars, euros, and British pounds. Gemini’s transaction volume during the same period was approximately 4,700 million U.S. dollars, of which 99.2% of the transaction volume is completed in U.S. dollars.
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Trading volume between Coinbase and Gemini in the past 24 hours | Source: Coingecko
It should be noted that Coinbase and Gemini have rich businesses. In addition to the exchange business, custody, stable currency, wallet and other businesses have sufficient demand for fiat currency services.
Taking stablecoins as an example, the USDC jointly launched by Coinbase and Circle, and Gemini’s GUSD are both issued in the fiat currency collateral model. According to DAppTotal’s statistics, the current market value of the two is about 800 million US dollars, and the corresponding fund custody and fiat currency deposit and withdrawal fees are generated accordingly. Also a good income.
From the perspective of JPMorgan Chase, although CEO Jamie Dimon personally holds a negative view on Bitcoin for a long time, the agency’s exploration of the blockchain field can be said to be deep enough and early, and its actual actions have also shown its curiosity and interest in cryptocurrencies. enthusiasm:
As early as 2016, JPMorgan Chase launched the open source blockchain protocol Quorum to serve the capital interaction needs of enterprises and financial institutions (according to Reuters reports in February this year, the business may be merged with Consensys within half a year); In addition, JPMorgan Chase is cooperating with organizations such as Microsoft and the Linux Foundation on blockchain identity authentication and financial information exchange.
In 2017, JPMorgan Chase launched the Interbank Information Network (IIN) based on Quorum, which is committed to solving the long-term challenge of interbank information sharing. At present, the network has attracted 397 banking institutions including JPMorgan Chase, National Bank of Canada, China CITIC Bank, etc.;
However, before the landing of this blockbuster cooperation, the encryption world has been walking among banks for a long time "with fear and fear", maintaining a highly uncertain cooperative relationship with them.
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Encrypted world and banks "love is hard to continue"
Even if it is as cautious and subtle as Coinbase, it has experienced several twists and turns: In August last year, it may have been interrupted from cooperation with Barclays Bank (Barclays) due to compliance reasons, and could not reach the UK Faster Payments Framework network (Faster Payments Scheme); the same year It also delisted Zcash in August, possibly at the request of Coinbase's UK partner bank, ClearBank, due to compliance concerns, CoinDesk reported.
Of all the shaky stories, those of stablecoin issuer Tether and exchange Bitfinex are the most tumultuous.
Before the New York General Attorney initiated this lawsuit, Tether and Bitfinex had been trying to cooperate with orthodox banks for a long time, but the result was always “difficult to continue”.
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A summary of the cooperation between Tether, Bitfinex and a group of banks | Mapping: PANews
It is not difficult to see from the timeline that Tether & Bitfinex have contacted mainstream orthodox banks such as HSBC, ING Bank, Wells Fargo, Bank of New York Mellon, etc., but the cooperation was interrupted without exception. At present, whether Tether & Bitfinex has the support of mainstream orthodox banks, and what is the status of their cooperation, these issues are unknown.
Tether’s ups and downs are actually the epitome of the cooperation between the encrypted world and orthodox banks: Although banks covet the small gold mine in the encrypted world, many uncertainties in the compliance of native companies in the encrypted world make it difficult for the two parties to reach cooperation, and often even It is in a state of tug-of-war, and the uncertainty is extremely high. In China, with the post-94 central bank banning Chinese exchange business, the domestic encryption industry is also "insulated" from banks.
But at the same time, the ill-fated fate did not prevent Tether from becoming increasingly prominent in the encrypted world. As of May 15th, according to data from Coingecko, USDT has a market capitalization of approximately US$9 billion and a daily trading volume of US$59 billion, ranking third in the global cryptocurrency market capitalization and trading volume in the first place. The additional issuance of USDT still has a significant impact on the price of encrypted assets, but such logical and crude price changes are often full of doubts.
If we take a closer look, perhaps Coinbase and Gemni have successfully opened accounts in mainstream financial institutions, while Tether & Bitfinex are still "fleeing into the wilderness" but "eating", which is a division in the encryption world:
